INTRODUCTION

According to a Survey India records highest rate of bribery in Asia i.e.39% and highest rate of citizens using personal connections (46%). Worries grew as inflation rate rose from 3.7% to 12.1% over 2001-2010. Bigger scams involving lakhs crores of rupees were into pockets of officials and ministers. Corruption became great hindrance in development of economy. The Modi Govt. took big step in solving this problem and introduced Faceless Assessment Scheme, Faceless Appeal Scheme, Faceless Penalty Scheme and now Faceless Dispute Resolution Scheme for Small and Medium Taxpayers.

India has been ranked at 88 in the World Rule of Law Index 2020 in terms of accessibility of alternative dispute resolution mechanisms. We have a multi-layered and time-consuming dispute resolution mechanism for taxation. Since we have a very high number of tax litigations, the resolution times are significantly higher, involving time and cost. Vivad se Vishwas Scheme,2020 was a step to settle long disputes and it is proving a great success.

As courts remain the single-most important way for taxpayers’ ex-post resolution, this alternative mechanism through the DRC shall help taxpayers in preventing new disputes and settling the issue at the very initial stage, resulting in savings of time and litigation cost.

FEATURES OF SCHEME

The new Scheme shall be effective from 1st April 2021 and shall have following features-

1. Only those disputes where returned income is upto 50lakh rupees and disputed tax is upto 10lakhs shall be taken into consideration by the Committee.

2. Assessee shall have option whether to opt this Scheme or go through appellate process.

3. Search and Survey cases are not eligible to opt this scheme.

4. If there is detention, prosecution or conviction under various laws, then assessee would not be eligible for benefit of this provision.

5. The committee will have the powers to reduce, waive any penalty or give immunity from any offence punishable under the Income Tax Act.

NEED TO CONSTITUTE COMMITTEE

1. In year 2018 a large amount of cases for past 6 years were reopened u/s 147 and many small and medium taxpayers were taken under purview. Many of them did not knew that notices were issued to them and demand was identified. They came to know when there bank account was seized. Then they rushed to file appeal due to which a large number of appeals were filed.

2. Further after demonetization cases were selected for scrutiny against the taxpayers who made cash deposit during demonetization. These people also filed appeals.

OUR COMMENTS-

The Dispute Resolution Committee proposed to be set up in the Budget will have multiple benches which will give opportunity to small taxpayers to settle tax matters without going through the appellate process. Given this, small taxpayers need to do a cost-benefit analysis in deciding which issues are worthwhile to litigate. This scheme is introduced for the benefit of small and medium taxpayers and in times to come the practical aspect of this scheme will be seen in favour of assessee because it will decrease litigation time and expense.

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The above comments do not constitute professional advice. The Author can be reached at [email protected] or visit website www.financialtreecompany.com. My name is CA Divya Agrawal and I am Practising Chartered Accountant, CEO and Founder of FINANCIAL TREE COMPANY (An online return filing and Tax Consultancy Company). We also upload educational videos in You tube and name of our channel is FINANCIAL TREE COMPANY. Our aim is to help people in improving their financial health by spreading knowledge and love. Stay Financially Fit and Healthy.

Author Bio

Qualification: CA in Practice
Company: www.financialtreecompany.com
Location: Bhilai, Chhattisgarh, IN
Member Since: 30 May 2019 | Total Posts: 33
FOUNDER AND CEO OF FINANCIAL TREE COMPANY website-www.financialtreecompany.com Contact No. 9111872247 Email ID- [email protected] (AN ONLINE RETURN FILING AND TAX CONSULTANCY COMPANY) View Full Profile

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2 Comments

  1. Divya Agrawal says:

    Dear Sir,
    Hope you are taking good care of yourself in this pandemic. As regards your query-
    It will termed as remuneration and not capital withdrawal because remuneration is out of income which you are receiving. Capital withdrawal would be withdrawals of capital which you have invested in firm or withdrawal from capital which is build up over the period of time after paying interest, remuneration and profit to partners.

    Since it is your income you need to pay advance tax on it and if you have not paid advance tax then you need to pay interest on it.
    Hope your query is clear.

  2. Tarun Sheth says:

    I hv some queries about interest on advance tax.
    I hv a partnership firm and the firm has major income from Rent. The partners receive remuneration from the income. Can this remuneration be termed as income of Partners or capital withdrawal? My CA has termed this as income. And since this money was considered as income, and I did not pay advance tax on it, I am charged penalty on delayed advance tax. My contention is that money received from the firm was capital withdrawal and that should not be considered as income, but withdrawal of rent received by the firm.
    Advise on the above query will be highly appreciated.

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